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Key Factors to Impact Prologis (PLD) This Earnings Season

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Prologis, Inc. (PLD - Free Report) is slated to report first-quarter 2022 earnings on Apr 19 before the bell. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this industrial real estate investment trust (REIT) delivered a surprise of 1.82% in terms of FFO per share. Results reflected low vacancies and solid increases in rental revenues.

Over the preceding four quarters, Prologis surpassed FFO per share estimates on each occasion, the average beat being 2.00%. This is depicted in the graph below:

Prologis, Inc. Price and EPS Surprise

Prologis, Inc. Price and EPS Surprise

Prologis, Inc. price-eps-surprise | Prologis, Inc. Quote

Let’s see how things have shaped up before this announcement.

Factors at Play

The U.S. industrial real estate market is still firing on all cylinders, starting the year with strong demand, which surpassed supply for the sixth consecutive quarter, per a report from Cushman & Wakefield (CWK - Free Report) .

There was a net absorption of 108.7 million square feet (msf) of space in the March-end quarter, up 7.8% year over year. New leasing activity exceeded 200 msf for the sixth quarter in a row.

The U.S. industrial vacancy rate came in at 3.3% at the end of the first quarter of 2022. It is already at an all-time low and marks a decline of 20 basis points (bps) sequentially and 160 bps year over year. Continued tight market conditions, aggressive competition and solid demand aided rent growth during the March-end quarter, which increased by 15.2% year over year to $7.89 per square foot.

Amid these, PLD is well-poised to benefit from its capacity to offer modern logistics facilities at strategic in-fill locations. This REIT is anticipated to have witnessed healthy demand on the fast adoption of e-commerce, with leasing activity getting support in the to-be-reported quarter. Moreover, with global supply chains transforming for faster fulfillment and resilience, Prologis is likely to have captured favorable fundamentals with its differentiated customer offerings and robust investment activity in the to-be-reported quarter.

Prologis’ expansion efforts through acquisitions and developments in recent years are likely to have boosted the top line during the to-be-reported quarter. In addition, PLD is likely to have gained from its industry-leading cost structure.

Prologis has decent balance-sheet strength to fuel its growth endeavors. A market leader, this REIT has the ability to raise capital at favorable rates and is likely to have maintained financial strength with liquidity during the period in discussion.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $1.09 billion, suggesting a 6.4% year-over-year jump.

The Zacks Consensus Estimate for Prologis’ quarterly FFO per share has remained unrevised at $1.08 over the past month. The figure also suggests a year-over-year increase of 11.3%.

However, with the asset category being attractive in the current challenging times, there is a development boom in some markets. Per the CWK report, in the first quarter of 2022, the industrial construction pipeline reached 660.8 msf, denoting the first time when the pipeline surpassed the 600 msf mark.

Moreover, the new supply aggregated 87.2 msf in the quarter, suggesting a 17.1% increase year over year. This high supply is likely to have intensified competition and affected pricing power during the March-end quarter.

Here Is What Our Quantitative Model Predicts:

Prologis does not have the right combination of two key elements — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an FFO beat.

Earnings ESP: The Earnings ESP for Prologis is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PLD currently carries a Zacks Rank of 2 (Buy).

Stocks That Warrant a Look

Here are two stocks from the REIT sector — Crown Castle International Corp. (CCI - Free Report) and Alexandria Real Estate Equities, Inc. (ARE - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter:

Crown Castle International, slated to release first-quarter earnings on Apr 20, has an Earnings ESP of +0.24% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alexandria Real Estate Equities, scheduled to report quarterly numbers on Apr 25, has an Earnings ESP of +0.25% and carries a Zacks Rank of 2.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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